Chapter 2: Fiscal Responsibilities

2.7 High Risk Areas

Audit activity is influenced by specific areas scrutinized by the Office of Inspector General or the General Accounting Office. As an institution, we pay close attention to these findings and focus our efforts to mitigate risk accordingly. PIs are cautioned to take particular care in the following high risk areas.

  • Allocability. Allocability, described in previous chapters, is a major focus of audit activity. Project expenditures must be supported by evidence of direct benefit to the project. The availability of funds to pay an expense, or the inclusion of an expense in a budget, is NOT evidence of the allocability of that expense to the project.
  • Rate of Expenditures. Two common situations in which the allocability of an expense will be critically reviewed are those where expenses are incurred before the start of a project period, and those where expenses are incurred just before the end of a project period. During the project period, PIs can jeopardize their funding when spending either accelerates at an unanticipated rate or falls significantly behind project projections.

    While there may be very good programmatic reasons for accelerated or decelerated levels of spending, it is ALWAYS a good idea to keep the sponsor informed in these situations. Guidance on spending patterns is available in the "more information" tab.

    It may be necessary and appropriate to purchase equipment, supplies or other expenses late in the project period. In these cases, it is important to document the allowability - and particularly the allocability of the expense. It is a good idea to get written approval from your grant or contract officer whenever an expenditure might appear to be questionable.Check the "more information" tab for more on allowable late in project expenditures.

  • Subrecipient monitoring: A subrecipient is a third-party organization performing a portion of a CHOP research project or other sponsored program. PIs have primary responsibility for monitoring subrecipients to ensure compliance with federal regulations and with both prime and subrecipient award terms and conditions. If the subrecipient is not completing the work, the PI should notify his or her research business manager to ensure payment is suspended. Additionally, all subrecipients are monitored by the Department of Research Finance to ensure compliance with federal and other applicable regulations, including performing the required audits with respect to their federal funding.
  • Cost Transfers. A cost transfer is an expenditure initially posted to one project and then transferred to another. Cost transfers are designed to correct errors and should never be used to manage funds. Circumstances under which cost transfers are allowable are determined by federal regulation and the Children's Hospital of Philadelphia Research Institutes' policy.

    Cost transfers are fertile ground for audit activity, and will be reviewed carefully - first by Research Finance staff, and often by an external auditor. One very good reason to "do it right the first time" is to avoid the level of scrutiny that a transfer, even one that is necessary and appropriate, will invite.

  • Clinical Research Billing. Clinical researchers must avoid billing errors by identifying standard of care and research procedures during the budget development process. Research subjects receiving billable services as part of study participation must be registered and scheduled through EPIC. Additional guidance and training to assist investigators is available from the CHOP Research Institutes' Clinical Trials Financial Management Office.

Ask the Experts

Steve Wiley
Director
Department of Research Finance



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CHOP Research Resources

  • Responsible Departments: Department of Research Finance, Sponsored Projects
  • The CHOP Research Institutes' Cost Transfer Policy
  • Clinical Research Billing (EPIC) Web Site and Training Module
  • he CHOP Research Institutes' Clinical Trials Financial Management Office

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More Information

  • Spending Too Fast or Too Slow Scenarios
  • Guidance on Allowable Late in Period Expenses

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